Most mutual fund lists rank funds only by returns. This list looks at two numbers that show how those returns were earned: beta and alpha. We screened equity mutual funds on Value Research data for beta below 0.9 and alpha above 4% over the last 3 years. 34 funds passed. After removing ETFs, fund of funds and sectoral or thematic funds, only 11 diversified equity funds remain. Below are the top 10, plus one fund that tied for the last spot.
Explore – 9 Hybrid Mutual Funds With 3-Year Annualized Returns Above 15.1% (Oct-26 Update)
What Beta, Alpha and R-Squared Mean
Beta shows how much a fund moves when its benchmark moves. A beta of 1 means the fund moves in line with the benchmark. A beta below 1 means it has moved less.
Example: DSP Value Fund has a beta of 0.66. If its benchmark falls 10%, the fund has historically fallen around 6.6%. The same works on the way up, so a low beta fund may also gain less in a strong rally.
Alpha is the extra return a fund earned over what its beta would predict. An alpha of 5 means the fund delivered about 5% a year more than expected for the risk it took. This is a better test of fund manager skill than simply comparing returns.
R-squared shows how closely the fund tracks its benchmark, on a scale of 0 to 1. A higher value means beta and alpha are more reliable. A low value means the fund behaves differently from its benchmark, so these numbers mean less.
The ideal combination is low beta and high alpha: a fund that swings less than its benchmark but still beats it.
How These Funds Were Filtered
We used 3-year beta, alpha and R-squared figures from Value Research, for direct plans only. The filter rules were:
- Beta below 0.9
- Alpha above 4%
- R-squared above 0.70
You may like – 15 Mutual Funds With 10-Year Annualized Returns Above 18.1%
Step 1: 34 funds passed the filter.
Step 2: Removed 2 passive funds (34 to 32). Tata Nifty India Digital ETF and its Fund of Fund version were dropped. An index fund has no fund manager making stock calls, so its alpha only reflects the digital sector beating the broader market.
Step 3: Removed 21 sectoral and thematic funds (32 to 11). These included technology, infrastructure, banking, transportation, digital India and other theme-based funds. Their alpha mostly came from their sector doing well over the last 3 years. These funds also carry concentration risk, so they don’t fit a general low-beta list.
Step 4: Ranked the remaining 11 by alpha. PGIM India Small Cap and ICICI Prudential Dividend Yield tied at 4.22. PGIM takes the 10th spot due to its lower beta, and ICICI Prudential Dividend Yield is shown as the 11th fund.
10 Equity Mutual Funds with Low Beta and High Alpha
| S No | Fund Name (Direct Plan) | Category | Beta | Alpha (%) | R-Squared |
|---|---|---|---|---|---|
| 1 | ITI Small Cap Fund | Small Cap | 0.89 | 10.37 | 0.93 |
| 2 | Invesco India Small Cap Fund | Small Cap | 0.86 | 9.09 | 0.90 |
| 3 | Mahindra Manulife Small Cap Fund | Small Cap | 0.89 | 7.10 | 0.94 |
| 4 | DSP Value Fund | Value | 0.66 | 6.69 | 0.81 |
| 5 | SBI Focused Fund | Focused | 0.82 | 5.56 | 0.82 |
| 6 | HDFC Flexi Cap Fund | Flexi Cap | 0.83 | 5.27 | 0.93 |
| 7 | HDFC Focused Fund | Focused | 0.81 | 5.23 | 0.91 |
| 8 | Union Small Cap Fund | Small Cap | 0.84 | 5.03 | 0.89 |
| 9 | Quant Small Cap Fund | Small Cap | 0.89 | 4.93 | 0.92 |
| 10 | PGIM India Small Cap Fund | Small Cap | 0.78 | 4.22 | 0.91 |
| 11* | ICICI Prudential Dividend Yield Fund | Dividend Yield | 0.89 | 4.22 | 0.92 |
*Also qualified. Tied with PGIM India Small Cap on alpha but has a higher beta.
Data as on 4 October 2026. Source: Value Research. Beta, alpha and R-squared are based on 3-year data.
Explore 35 Curated List of Mutual Funds with live returns
Category-Wise Breakdown
| Category | No. of Funds | Funds |
|---|---|---|
| Small Cap | 6 | ITI, Invesco India, Mahindra Manulife, Union, Quant, PGIM India |
| Focused | 2 | SBI, HDFC |
| Flexi Cap | 1 | HDFC |
| Value | 1 | DSP |
| Dividend Yield | 1 | ICICI Prudential (11th fund) |
No large cap, mid cap or large & mid cap fund made the list.
What Stands Out in This Data
- ITI Small Cap leads on alpha at 10.37%. But its beta of 0.89 is right at the edge of the filter. This fund is at Top-7 in smallcap funds based on live rolling returns tool.
- DSP Value has the lowest beta at 0.66, with a healthy alpha of 6.69%. It is the only fund on the list with beta below 0.75.
- Small cap funds take 6 of the 10 spots. Small cap funds have done well against their benchmark over the last 3 years.
- HDFC has two funds on the list. HDFC Flexi Cap (Part of Top-10 Flexicap Funds based on rolling returns as per our tool) and HDFC Focused show almost identical numbers: beta around 0.8 and alpha around 5.2%.
- Only 8 funds clear 5% alpha. Quant Small Cap missed this mark by a small margin at 4.93%.
- Four funds sit at beta 0.89. ITI Small Cap, Mahindra Manulife Small Cap, Quant Small Cap and ICICI Prudential Dividend Yield could drop out with a small change in market movement.
Why Low Beta in a Small Cap Fund Is Not Low Risk
Beta is measured against the fund’s own benchmark. For a small cap fund, that benchmark is a small cap index.
So a beta of 0.86 for Invesco India Small Cap means it moved less than the small cap index. It does not mean it is less volatile than a large cap or flexi cap fund. Small cap funds can still fall 25% to 30% or more in a sharp market correction.
Compare beta only within the same category. A low beta small cap fund is still a small cap fund.
Things to Check Before Comparing Further
- Alpha looks backward. It shows what a fund did over the last 3 years, not what it will do next.
- Track record length. Mahindra Manulife Small Cap Fund was launched on 12 December 2022. It has just over 3 years of data, so its numbers come from a single market phase.
- Fund manager changes. If the manager who generated the alpha has left, past numbers may not hold.
- Fund size. Small cap funds with very large AUM can find it harder to repeat past performance.
- Numbers differ across websites. Value Research, Morningstar and AMC factsheets may use different benchmarks and periods. Compare funds using one source only.
- Rolling returns. Point-to-point numbers can hide inconsistency. Check how these funds performed across different periods on our mutual fund rolling returns page.
FAQ
What is a good beta for an equity mutual fund?
There is no single right number. A beta below 1 means the fund has moved less than its benchmark. A beta below 0.9 shows a clear difference. Always compare beta with funds in the same category.
Is a higher alpha always better?
Not on its own. A high alpha with a low R-squared is less reliable. Alpha is also based on past data, so check whether it has been consistent across different periods.
Why do alpha and beta values differ across websites?
Each platform may use a different benchmark, time period or calculation method. That’s why it is best to compare funds using data from one source.
Disclaimer: This article is for educational and comparison purposes only. It is not a recommendation to buy, sell or hold any mutual fund. Data is sourced from Value Research as on 4 October 2026 and may change. Past performance does not guarantee future returns. Mutual fund investments are subject to market risks; read all scheme-related documents carefully. Please consult a SEBI-registered investment adviser before making any investment decision.
